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Case Study

Disneys world is it so nice?

MIM2/Group B29 Mathilde Sollier Benjamin Soumagne Vincent Speranza Maxime Sudre

Marie-Estelle Surget October 2007

Table of Contents
p 3

I Description of the Disney Industry

. p 4

1) Evolution of an international brand

a. Walt Disneys road to success (19221957) b. The transition era (1957-1984) c. Eisner rules (19842005)

2) A presence with different means all over the

a. Disney current situation b. Several Holdings across the world c. Consumer Products d. Disney Parks and Resorts
3) What makes Disney a successful brand 4) A success which has also its weaknesses

II Disney facing Globalization

. p 13

1) Opportunities and threats in the market

a. Opportunities b. Threats

2) The increase of the competition

a. Disneys major competitors b. A rough competition with new actors c. New investments in competitive domains

3) The drawbacks and the difficulties since the 90s

a. The retreat of sales

b. Disney facing criticism

III Will Mickey survive to Globalization ?

.. p 27


1) The new strategy of the company 2

2) The assets for the future

Conclusion Resources

.. ... p 31

. . p 32

Who has never heard about the little mouse Mickey? Since its creation, Walt Disney Company has evoluted first in the USA, then in Europe and finally in Asia. Today, the brand is well known all over the world thanks to the cartoons, its theme parks and all its by products. We have decided to study this company in order to understand how a little mouse managed to become well-known and why we can talk about a worldwide success. The Globalization helped the company to develop itself and allowed some countries to accept more easily this American product. We are going to explain the different strategies lead for many years, but also describe what have been the drawbacks. Walt Disney Company knew difficulties by different ways during these last 2 decades. So, the objective is to understand if the globalization had only positive impact on the American company? Did Walt Disney Company exploit its notoriety using Globalization? Today the competition increased and such company as Pixar or Dreamworks developed the same products as Disney. We can think that the competitors took advantage of the experience of Walt Disney Company and little by little penetrated the market.

By developing an international strategy thanks to the phenomenon of Globalization, didnt Walt Disney

Company create its own competitors? Didnt the American company open doors, which finally brought its several weaknesses and threats in the entertainment market ?

I Description of the Disney Industry

1) Evolution of an international brand
a. Walt Disneys road to success (19221957) The story began in 1923. Walt Disney signed its first contract with M.J. Winkler in order to produce a several Alice Comedies in October, 16th. This date is used to count the beginning of the Disney Company. At this time, the name of the company was Disney Brothers Cartoon Studio, with the two brothers, Walt and Roy Disney, ruling it. In 1926, Roy Disney suggested to change the company name into the Walt Disney Studio. Two years later, the first Mickey Mouse cartoon appeared on screens. At the end of 1929, the company changed is name and status into Walt Disney Productions.Ltd to replace the partnership. New companies are created: Walt Disney Enterprises, Disney Film Recording Company, and Liled Realty and Investment Company. In 1937, a new film is launched: Snow White and the Seven Dwarfs. It is a full success and it will stay as a reference in number of tickets sold. It is also the first animated movie in this length format for the company. The following year, Walt Disney Enterprises, Disney Film Recording Company and Liled Realty and Investment Company are merged into Walt Disney Productions. In 1940, Studio moved to its current location: Burbank in California. The same year the movie Pinocchio encountered a wide success. At the end of 1941, US entered at war and the studio is

charged to make propaganda films to help the state. In these years of wars, the company started a new strategy of low cost films, preferring quantity to quality. Bambi remains an exception with a six years long production. In 1944, the company had financial issues concerning its cash management. In 1950, Cinderella appeared on screens, cutting the former strategy of low cost animated movies. Two years after, the company started planning a theme park. One year later, Retlaw Enterprises are formed to control the rights of the Disney name. In 1954, Buena Vista Productions is formed to distribute the films. The next year, the Lady and the Tramp is launched as the first widescreen cartoon, making a reference of quality and techniques in the sector of animated movies. At the end of 1957 Walt Disney Productions went public. During thirty years, Walt Disney Productions had become a major corporation in its sector. During the war, Mickey got a status of star thanks to several diffusions to distract the GIs. The company diversified its activities, impacting the TV, which is in full expansion. The name Disney became an institution in three decades. b. The transition era (1957-1984) At the end of 1966, Walt Disney died, leaving the company to his brother Roy. The next year, a milestone is reached by the company: The Walt Disney World Resort construction began in Florida. The same year, the last project of Walt appeared on screens: The Jungle Book, which is also the also animated movie directly produced by the company. In 1971, The Walt Disney World Resort received its first visitors. Roy Disney who was the chairman since Walt death, died the same year. Donn Tatum was upgraded as the new chairman and Card Walker became president. In 1977, the son of Roy Disney left the company criticizing the management and the decreasing quality of its products. Two years later, Don Bluth, famous animator, dismissed with several important members of the company. He started its own company and encountered the success, he is known as a critic of

Disney. The same year, the company launched its first PG-rated films: Take Down and The Black Hole. In 1980, the film division got a new president: Tom Wilhite. His main task was to modernize the film division. A new division is also created in this goal, the home video division. The following year, the company planned to enter the cable and network which where in full development. The first videos became available the same year; they would be highly cash maker for the company all along the years. In 1982, the Walt Disney World Resort got bigger with the EPCOT Center (dedicated to international culture and technological innovation). The same year, the company had a new CEO: Ron W. Miller (Walt Disney's son-in-law). Next year, US cable systems added Disney Channel to its panel. The company inaugurated the Tokyo Disneyland in Japan, First Park outside the US. These years were difficult for Disney Industry. Even if they managed well to get new markets and to develop new activities such as theme Parks or Broadcasting, they cut off the creation flow after the Walt Disney death. The first critics appeared on their products and on the top management with several resignations.

c. Eisner rules (19842005) 1984 is a huge milestone for Disney. The CEO, Miller, is replaced by Michael Eisner due to a putsch intended by Roy Edward Disney. Frank Wells took the presidency also occupied by Miller. In 1985, The Black Cauldron crashed in the box office and at the same time video sales of Pinocchio were skyrocketed. Two years later, a new name was chosen: The Walt Disney Company. In 1987, an agreement was signed between France and Disney to build a theme park in Europe. In 1989, Walt Disney world, in Florida gained a third park: The Disney MGM Studios. The park's theme is show business, drawing inspiration from the heyday of Hollywood in the 1930s and '40s. In 1991, the film Beauty and the

Beast was launched on screens and became the first animated film nominated for the Academy Award for Best Picture. The next year, Euro Disney Resort near Paris, got its first visitors. At the same time, Aladdin encountered a massive success it would generate huge licensing revenues. In 1993, Miramax Films became a Disney corporation. In 1994, the president, Frank Wells died suddenly. Jeffrey Katzenberg an important executive member left the company (he will found DreamWorks SKG). A major project is forsaken by Disney (a theme park in Virginia). The Lion King, appeared on screens and reaching sales records. In 1995, Michael Ovitz became president. Toy Story, the first animated movie produced by computer was created. The success is huge for Disney and its future famous company: Pixar. The following year, the Company came to a major acquisition with the Capital Cities/ABC group. Two years later, Disney started producing its first DVDs. The same year, a group called the Southern Baptist Convention voted to boycott The Walt Disney Company due to the company policy concerning gay and lesbian in its main theme park in Florida. The company kept its tolerant behavior towards this community. In 1998, Disney's Animal Kingdom was inaugurated at Walt Disney World (Fourth Park in Florida). In 2000, Disney encountered into a conflict with Time Warner concerning fees on broadcasting. An agreement was quickly found by both parties. The next year, two new parks are inaugurated: Disney's California Adventure and Tokyo Disney Sea. Disney acquired Fox Family for $3 billion, developing its broadcasting division. The September crisis reached Disney: Sid Bass a billionaire huge shareholder sold his stock, crushing Disney. Eisner, the CEO lost credibility and his main ally in the board. In 2002, Walt Disney Studios are inaugurated near Disneyland Paris. Disney made several deals to get Saban

Entertainment, an agreement with Squaresoft for video games, and also a joint venture business with Sanrio. In 2003, Roy E. Disney dismissed from the board of directors, with former members of the

company he started a "SaveDisney" plan to get rid of Michael Eisner using Medias. Finding Nemos, Pirate of Caribbean became world success. In 2004, Comcast made an unsuccessful hostile bid for the company. CEO Michael Eisner was fired, replaced by George J. Mitchell. However he kept a place of Director Emeritus. The following year the Hong Kong Disneyland was launched. These two decades were crucial for Disney. The spirit of creation and world expansion is back in the corporation. During Eisner time, Disney encountered massive success in movies and managed well its patterns with adapting to new products like DVDs. The company acquired several corporations in order to stay the leader of the sector. However, theme parks in Japan or in France encountered profit issues and Disney was deeply impacted by the global financial crisis. This cost to Eisner its place.

2) A presence with different means all over the world

a. Disney current situation Two years ago, Bob Iger took the lead of the company. The following year, Disney recorded a great success with High School Musical and the second Pirate of Caribbean movie. These two movies boosted the results of the group. The company purchased Pixar Animation Studios for 7.4 billion dollars and the Apple CEO, Steve Jobs became the main individual shareholder with 7% of the stock. Last year has been successful with a record of 112 million in Disney entertainment parks. The company had 34.3 billion dollars of revenues in 2006, an operating income of 6.491 billion dollars and 133,000 employees all over the world. This year, Disney set up a Partnership with Amblin Entertainment which may lead to several adaptations in parks and movies. The company has purchased Supermarket Sweep. Last month, Disney Channel broadcasted High School Musical 2, setting a new record with 17.24 million of audience.

The stock price has risen by 15% in one year due to the good results of Disney. However the sub prime crisis is threatening its share price as a major agent of the NYSE. Iger is currently doing well at the head of Disney. The company is doing well in all of its activities: Films, broadcasting, theme parks and consumer products. The acquisition of Pixar, one of its main competitors but also partner, is a strong sign for its stakeholders. Disney will keep on growing in order to stay one of the largest media and entertainment corporations in the world. Actually, the Disney is the second largest media group in the world, just behind AOL Time Warner. b. Several Holdings across the world

Studio Entertainment This was the first business of the company until 1955. Originally, Disney only made films. Disney has largely split its activities, producing movies but also spectacles, acts, music... Dick Cook is at the head of DSE.
- Buena Vista Motion Pictures Group (or Walt Disney Motion Pictures Group, Inc.): Disney's movie studio, Walt Disney Pictures, Touchstone Pictures, Hollywood Pictures, and Miramax labels.

- Walt Disney Animation Studios and Pixar Animation Studios: Disney's animation studios. Walt Disney Motion Pictures International: distributes company's motion pictures internationally. - Walt Disney Home Entertainment: distributes company's motion pictures to rental and retail markets. - Disney Music Group: releases original music and movie soundtracks under four labels - Buena Vista Theatrical Group: produces Broadway-style shows - Disney Live Family Entertainment: produces Disney on Ice

Media Networks The organization of Disney Media Networks is based on the American Broadcasting Company (ABC). It was a major acquisition for Disney which occurred in 1996 and it includes: - Walt Disney Television - ABC Studios (formerly Touchstone Television) - ABC Entertainment - Disney ABC Domestic Television (formerly Buena Vista Television) - ESPN (sports channels) - Walt Disney Internet Group (mainly its own websites)
Disney also owns substantial parts in: - Lifetime (50%) - A&E (37.5%) - Jetix Europe N.V. (74%) - GMTV (25%) - Super RTL (50%) Disney also owns 57% of Citadel which holds the ABC Radio Network. The company has its own radio stations: ESPN Radio and Radio Disney. c. Consumer Products - Disney Consumer Products (began in 1929) - Disney Store (began in 1987) -Disney Interactive Studios (former Buena Vista Games) d. Disney Parks and Resorts


- Disneyland Resort (Anaheim, California, USA) - Walt Disney World Resort (Lake Buena Vista, Florida, USA) - Disneyland Resort Paris (Marne La Valle, France) - Hong Kong Disneyland (Penny's Bay, Lantau Island, China) - Tokyo Disney Resort (Urayasu, Chiba, Japan) - Walt Disney Imagineering (Began in 2001): Theme Parks assets creation and management. - Disney Cruise Line: Travel agency specialized in cruises and especially in the Caribbean Sea. The Walt Disney Company contains an amazing number of companies making different activities. However, there is a strong common point between the 130,000 people who are working for Disney. They all participate in creating entertainment for millions of people all over the world.

3) What makes Disney a successful brand

Who has never heard about Disney brand? As Coca Cola or Mc Donald, Disney managed to implant its image everywhere in the world. According to a survey of The Added Value Company, Mickey is immediately known by 98% of people and Donald by 96%. All the children are fascinated when they watch on TV Peter Pan or Cinderella. Disney brand inspires confidence, quality and became a family entertainment. It adapted itself culturally and temporally, and uses in each story such values as love, equity, tolerance, friendship or bravery. Each hero incarnates ethical and universal values. Today, despite the Globalization, cultures are still different between Europe, America and Asia. But people have some values in common, and Disney uses these common values in all its films. Characters touch all the ages, as well a little girl of 5 years old as a dad of 40 years old. The company uses dream and imagination to catch the attention of its public. This method is very simple but universal because a little girl, French or American, has dreams and dreams about the same things.

The worldwide public spends an annual 600 million hours watching the Disney Channel and two billion hours at their theme parks. It really explains why the name Disney is associated with fun, entertainment and family. According to the survey of Interbrand, the brand value of Walt Disney Company was estimated in 2002 by 29.256 millions $; rank 7 among 100 brands. "For better or worse, his innovations have shaped our world and the way we experience it. But the most significant thing Walt Disney made was a good name for himself." Time Magazine "Disney boldly diversified into television, commercials, music, comic strips and amusement parks at a time when other studios could think of little but celluloid" The Economist

4) A success which has also its weaknesses

As we explained in the previous part, the notoriety of Disney is its main strength. Its unique and universal personality made this brand popular all over the world. First, thanks to cartoons, the company promote cinema for children but also for adults. Then, in order to create a continuity, the American company built several theme parks in the USA in 1955 (California), in Japan in 1983 (Tokyo), in France (Paris) in 1992 and the last one in China in 2005 (Hong Kong). Disney uses different channels in order people keep in their mind all the elements linked to the brand. But little by little, the competition came, other multinationals created the same kind of offer, with the same kind of public. We will explain in another part who are the current competitors.

An old and very well known brand

Several films didnt find success: Altantis in 2001, Treasure Planet in 2002, Peter Pan 2 in


Diversity of activity sectors (TV, radio, cinema)

2003 or Brother bear in 2004 Difficulty to create cartoons with a new quality of image. The company DreamWorks was the first with Monsters Inc. to promote this kind of cartoon with computer animation.

Legitimacy in animation Keeps 90% market share in animation market Each cartoon has its by products (toys, clothes, dolls, books) and can get a very fast notoriety Used stories written by famous authors like Anderson or Grimm Helped to develop research in the quality of the images of the cartoons, so has participated in the cinematographic revolution Uses different channel of distribution to promote its products; not only TV but also Internet. Such series produced by Disney, as Lost or Desperate Housewives, has been broadcasted freely or not, on Internet, after the diffusion on the American channel ABC. It means the brand adapts itself to the behaviour of the consumers. Or in August 2007, the brand bought in Second life the Club Penguin space. Some of their films are based on an attraction of the parks. The good example is Pirates of the Caribbean which is a success. People knew the hero during years going to theme park, so it has been very easy to promote the film. Disneyland Resort Paris is the 1st touristy destination in Europe with 12 millions visitors each year


Thanks to theme parks, allowed to develop touristy regions and develop also business tourism Many partnerships are set up in all the theme parks concerning hotels and restaurants, to keep a good quality and a good service. For example, Starwood in the USA, leads several hotels inside the Disney Resort

II Disney facing Globalization

1) Opportunities and threats in the market
A brief Economic Situation and the competitive advantage of the firm First of all we can set, in a few words, the economic situation of this multinational Firm, its value, and its core activities. From an economic point of view Disneys revenue around the world is strong. The revenue ($ 34 Billions in 2006) and the global operating income ($ 6,5 Billion in 2006) of the company are still increasing year after


year. For this company this is a thrilling sense that the sky is the limit said Robert A. Iger, CEO of the Walt Disney Company. The Walt Disney Companys activities are divided between several activities which generate more or less revenue in the group: Media Network (42%), Park &Resort (29%), Studio Entertainment (22%), and consumer products (6,5%).



fiscal year, the Walt Disney Company gets high revenue ($ 34 Billions in 2006), high Cash flow and a high net earning in each business activities.


The competitive advantage of the firm and its value are a source of opportunity for the firm and its global expansion:

the company aims at consumer of all ages the firm fit with the different walk of life around the world the firm shows high sense of creativity (creates new characters eg: Cars). absorb and make merger and acquisition (Pixar animation Studio) Develop innovation (Distribution networks) a. Opportunities

Acquisitions The Walt Disney Company furthers its commitment to Animation Studio. In 2006 Disney bought Pixar Animation for $7,4 billion, which was the property of Apple. So Steve Jobs entered in the Executive Board of Disney. The acquisition and purchase of Pixar Animation Studio improves Disneys position. It makes it a real leader in family entertainment throughout the world. Furthermore, this enables Disney to stay in the race and keep the leadership in technological advancement for entertainment and distribution. Studio entertainments are essential for Disney in order to develop a sustainable growth. Distribution Technology: The Media Network The global strategy of the firm is to be available wherever, however, and whenever to the customer. Disneys recent adoption of a new distribution technology and distribution networks such as Ipod and I-tunes, cell phones or are a clear example of this will to become and stay global for the company.


Disneys Entertainment was the most demanded on i-Tunes in 2006. Among Kids from 614 year old Disney was the most requested and viewed web site in 2006. With its new Mobile phone, launched in 2006, Disney developed one of the best mobile phone services which really meets the needs of parents and kids. Anyway, many viewers requested about 30 million episodes on Ann Sweeney: the President of Television department of Walt Disney Company said we must know who we are and where we are going. We are a provider of contents and we go everywhere where the consumer is. Disney announces the choice of an offensive strategy upon numeric distribution. Disney will privilege the use of internet to broadcast or download its work craft: I-Tunes and I-Pods. Disney offer free download of series as Lost, Desperate Housewives through with advertising presence in exchange. This is essential to the companys future growth. Disney invested also in creative franchises across platforms and markets arousing multiple generation (next and traditional). For example Pirate of Caribbean was released as a movie (surpassing $ 1 billion of revenue), but also as books, attractions park, theme couture, DVDs (sales of more 5 million units), song downloaded on ITunes . An other example, Disney developed the four mostdistributed domestic cable television networks: the ESPN cable, which can deliver Monday Night Football or NBA play-off coverage.


Disney invested too in TV Entertainment through Disney Channel which broadcasted famous new and creative series such as High School Musical. This was very profitable because it spread up and generated national concert tour and thousand of licensed musical performance in local school. Furthermore, on TV screen, through ABC Television, Disney delivered 3 of the top 5 series among the Adult 18-49 audience, such as Desperate Housewives, Lost, Greys Anatomy or Brothers & Sisters This entire distribution network is crucial for the company. It makes Disney a global Company all over the world and consequently enables it to develop sustainable growth. Media Networks and Park resort represent for the Walt Disney Company a real opportunity of global development and sustainable growth, as an example we can see the amount of Capital invested by the company in each of this sector and activities since 2002.


Disney Parks & Resorts and Exhibitions: No Border in the world This year, the 50th anniversary Celebration leads to an outstanding attendance at Disneyland Park (e.g: in Orlando Park in Florida). Park and resort also allowed the Walt Disney Company to spread around the world, and are still a high opportunity for the group to grow and to increase its revenue. International business is a concern for Disney. Emerging market such as China (Hong-Kong) or India, which represents each more than 800 million consumer under 21 year old, pose a real opportunity for the Walt Disney Company. The most recent example is in China, where Disney opened the Hong-Kong Disneyland in September 2005. This enables the firm to boost its retails through the licensing of about 4200 Disney Corners at department stores and strengthen its position in Entertainment activities. The business activity of Disney Consumer Products is reinforced in China by more 4 200 Disney Corners across 25 cities, and so reaches more than 25 million consumers. Especially in Hong-Kong the population is between 15-64 years old and its getting bigger year after year. This is a huge potential for Disney to expand its market in this place in China, and through this group of people. Furthermore the economic climate is booming and good.
We can see here the forecasted evolution of age of Hong Kongs population.

So, see



that people between 0-14 year old (children) will represent about 15% and adults (15-64 year old) will represent the bulk (90%) of the population. In addition, Disney expands in India. Disney made a strategic acquisition. It bought one of the countrys leading kids television network called Hungama. Furthermore, with Disney Channel, the company reaches in India more 30 million household and holds the main share of childrens television market. Disney acquired an equity interest in UTV Software; an Indian company specialized in Entertainment and television production. Also, some important achievements have been made in 2006 in emerging markets; for instance The Lion King play occurred at the Shanghai Grand Theatre. The Company opened its first office in Russia, and organized Cinderella Ball at the Kremlin Palace. The Company will set up in Russia in order to expand its presence on television. b. Threats

A sharp, overwhelming, and innovative competition Disney might also deal with many competitors concerning the movies that the firm produces and release. For the first time, Disneys monopoly in the Animation market and the Entertainment market for kids and teenagers seems to be shaken by a fierce Competition of French Directors cut or other American Entertainment studio such as DreamWorks Studio, Warner Bros studio, the Fox. For instance, the Fox in 1998, with its film Anastasia (2,7 million of viewers in France) tried to compete with Mulan (Disneys production). The threat for Disney to loose market share is to be counterfeit somehow by competitors which try to be as creative as Disney and which try to reach the same target audience (kids and teenagers). An other example when DreamWorks released, in first, its movie Fourmiz before Bugs Life (1001 Pattes) produced by Disney. In this case, this is really two movies made in the same way by a similar conception. According to Bill Mechanic, (the CEO of The


Fox in 1998, DreamWorks is the main competitor for Disney, the most aggressive in production and in quality in the movies; but though DreamWorks still keep a marketing strategy very close with what The Fox can do. According to him, 70% of Disneys profit came from the two big animation movies produced each year by the Disney studio. Animation Entertainment is the most global and profitable sector said JF Camilleri, the CEO of Gaumont Buena Vista International (a French subsidiary of Disney). That is why Disney allocate huge amount of its budget to marketing expenses, ads space campaign, web site). France is the third market in volume for market share for animation movie, behind the United States and Japan. Finally, other French Entertainment studios, try to compete with Disneys blockbusters in a different way and style of movie, such as Kirikou et la Sorcire aiming much more children audience (6-10 years old). Didier Brunner, CEO of Les Armateurs producing this movie kirikou claims that in order to live out of the shadow of Disney, and survive it, we need to develop a new kind of scenario, a very innovative graphism system with a very different source of inspiration, with what can already exist in the US Market.

External instability of the environment Some events might have impact on Disneys industry. For example the crisis of the 9th of September in 2001 reduced mass tourism significantly. So the Walt Disney Company had to change its renovation project of complex and hotel launched by the end of the 90s. In 2004, tourism seems to be better off and begin to recover from this crisis. But the economic results are still not the same of what they did. Walt Disney Company was considered as a Milk Cow during the past, but since 2002 the most profitable business unit turned to the Media Network (such as Television Networks, and cable channel Networks). For instance, other activities such as theme Park & Resort were not so profitable. Until 2004, Orlando Park, in Florida, was in deficit. An other issue: as Mattel did, Disney must also cope with Chinese issue concerning lead paint. Disney has decided in September 2007, to control and check its toys produced under license by its Chinese subcontractors. The company

will tighten control on many types of toys who could be dangerous for children because of the lead paint they contain. For instance, among one of the three recalls that Mattel did this summer, about 450 000 toys and by-products of animation film Cars were concerned. Anyway, from a social and cultural point of view, Disney has to deal with social responsibilities such as philanthropy, environmental affairs. So Disney developed healthy foods programs and tries to sell a healthier food in its park resort.

Political Threat vs. Economic development The Walt Disney Company confirmed on April 2007, that it will give up its second project of Disneyland Park in China in Shanghai. This Park was supposed to open in 2010 and should cost more 30 billion of Yuan, for an area of 6 km (4 times more than Hong-Kong Disneyland). Shanghais Disneyland could have been the 6th Park and complex in the world. Disney argues that it would be very profitable for local economy. But the government in China considers this American investment as repetitive and useless, and would have to concentrate financial effort to raise the standard living of shanghai. It is a fact that there is a real contrast between the standard of living of the local population (poverty), with what can propose Disneys activities (high and luxury consumption, internet). Disney would have to face a gap. From now, Chinese government is not eager and prepared for this. Anyway, if Disney set up in Shanghai, some consider that it would be a cultural invasion of US culture against Chinese culture. Without admit the pressure coming from Beijing which refuses to invest in Shanghais development, Disney confirmed its will to set up its second Park in China. According to Wing T. Chao, vice CEO of Disneys Asia-Pacific area: the company is positive to build a second park in China on a long term period, but it wont be necessarily in Shanghai. There might have other opportunities elsewhere. Until now, the talks with Chinese Government are stopped and closed about this subject.


In fact, there is an other reason; Beijing fears for the reinforcement of Shanghais attraction and considers this local capital enough competitive. Disney must find an alternative and find an other place. Although, Disney is not completely helpless; it decided to launch a massive marketing offensive upon childs program: Disney broadcasts daily its Dragon Club, viewed by more 250 million of household in China; and concentrate itself on sales of consumer products in more 4200 Disneys Corners scattered everywhere in China.

Internal instability: a management crisis It is true to say that since the middle of the 90s, the Walt Disney industry is declining, and even caught up on many activities by its competitors (animation Films, Entertainment studios, Park and resort, and merchandising. At the end of 2003, the share starts to fall, the audience television of ABC channel shrinks, and the distribution contract with Pixar is called into question. The shareholders are complaining. In 2003, Roy Disney (sons Disney founder) and Staley Gold, dismissed the Board of Directors and denounce Michael Eisers management policy (CEO of the Walt Disney Company) and want the immediate recall of the CEO Eisner, and create the Website In parallel ways, the 29 th January 2004, Pixar Animation studio (Toy story, Monster & Cie, Finding Nemo) claims its will to stop its collaboration with the Disney after 2005. Furthermore, the 11th February 2004, Comcast (the first American company of cable Television Network, try a takeover bid on the Walt Disney Company for $66 billion. Additionally, the Institutional Shareholder Services (ISS), an advisory company for investors, encourage recalling the CEO of Board of Directors, in order to dissociate the two function of CEO and President of the Board. Even Calpers the first Pension Fund of USA takes part against Michael Eisner. Finally, the 3rd March 2004, M. Eisner is re-elected as CEO, but the Board of Directors split up the two functions of CEO and President of the Board of directors. This was a landmark decision, in the history of Americans Multinational Companies.

2) The increase of the competition

a. Disneys major competitors

Disney is playing on many different sectors of entertainment. The company is therefore facing an increasing competition with groups more and more powerful because specialized in different activities. Television networks have started to expand their activities with Theme parks like CBS, while important cartoon companies witch have merged with a major communication actor (Time-Warner) are proposing a strong competition. The development of internet in the late 80s has created a new danger with the easy broadcasting of different television shows, and the use more and more early for kids which are able to manipulate computers better than their parents

The Box office While Disney is still holding a good part of the Box office shares concerning the development of cartoons, it is no longer the major actor of the market. The strong


Warner Bros studios after its late merge, are mainly holding the market with new release every other year. Sony and Viacom are competing behind launching mainly movies fighting against Disneys Pirates of the Caribbean. The corporate conglomerate known under the name of Viacom is the product of high-profile mergers bringing Paramount Pictures, Infinity Radio, MTV, Nickelodeon, and the CBS television network under the same umbrella, which makes it a strong actor for the future with huge budget and a large network for the distribution of its production.

Theme parks The Mickey Mouse brand, formerly the major actor of the theme park competition with the worldwide famous Disney land, is now retreating as the development of park is getting stronger. For kids, parents, or teenagers, new creators are innovating and proposing an important challenge. While Warner Bros was selling its stake in the Gold Coast theme park to Village Roadshow, the company has presented thanks to the three gold coast theme park collective revenue of $254 million over the past year. With $40 million operating profit Village Roadshow has increase by 400% threatening the throne of Disneyland thanks to new attendance increase every year. Sea World has lifted its performances and attendances according to the latest reports and is offering new shows. Finally, Warner Bros Movie world is also in good shape with a 5.8% increase in population and the opening of thrilling new rides. And where is Disney in all this? The company is keeping is good hand on the entrance of the park but studies shows that the lack of renewal of the attraction are


pushing the consumers over a certain age to go to other theme park.

Television As the popularity of Disney grew, the demand was growing in the same direction. In 1983, Disney Channel was broadcasted for the first time. At that time, it was a premium channel that was on the air only 18hours a day with magazine and cartoons for kids. In 1988, the followed the development and launched the first Disney sitcom Good Morning Miss Bliss. And on, the Channel has now progressed with the 24hours broadcasting. In the late 90s, Zoog Disney was created. The company chose to aim strategically at the pre-teenagers and teenagers. Disney Channel was gradually remodeled as to keep up with the changing demand but today as competition is starting to come out it is in most countries the major kids cable channel.
b. A rough competition with new actors Competition is organizing itself around Disney.1998 was the year of new competition and for the first time in more than 50 years, Disneys monopoly in cartoons was hustled by European producers and American studios. A new competition has just started and is ready to stand up against the strongest kids and families entertainment company in the world. The Prince of Egypt (Dreamworks), Excalibur (Warner Bros), Kirikou


and the witch (Armateurs), were competiting this year with Mulan. While Disney decided to release its movie like usual just before Christmas, others decided to enter the market earlier in order to win slowly the market! Movies for children are no longer a monopoly as many new production houses are investing the market and attacking the Disney rock! (Dreamworks prince was released the same day as Disneys Prince of Sicilia: Mafia). In the past 10 years, new actors have decided to engage in the challenge. More projects should see the day in the years to come especially coming from Europe. It has been the case in the beginning of the 21rst century with Strum, the movie mixing animation video and real filming that has integrated successfully the new technologies even though the results in term of competition was not what was expected by the producers. DreamWorks engaging a harsh competition with Disney even chose to advance the release of its Fourmiz to November while Disneys Bugs Life was prepared for November the next year. Same world, same techniques and a common conception were kids movie should now also be for parents. c. New investments competitive domains in

The buy of Pixar to enter the new cartoon era In January 2006, Disney announced the buying of Pixar for 7.4 billion dollars. This strategic step came with the increasing development of the movie era rather then the cartoon. Animation is now the new word in kids movie development and the giant mouse is now back to a second plan where toys are holding most of box office. With Pixar as a specialist of the development of animation movies, Disney is entering the innovative market as well as rough competition where movies come out closely and are pretty similar (see Bugs Life and Fourmiz).

"The addition of Pixar significantly enhances Disney animation, which is a critical creative engine for driving growth across our businesses," said Disney CEO Robert Iger in a written statement.
The relationship growing with the two actors has permitted Disney to keep hand on the market while Dreamworks where its head director (excepting Spielberg) was a former top executive of Disneys group.

Video games, Internet

Disney Interactive studio, which is associate to the Walt Disney company as the entertainment developer has a bran new portfolio of video games available to the public. With the development of consol games, Disney has decided to compete on every market and not only dedicated to young people but decided to inject some star power into its game with the creation of the Turok hero, Disney is targeting over 16 years old and even young men with actionviolence video games. The game proposes fights between commandos and all types of human enemies, dinosaurs and monstrous creatures. Disney is no longer playing in kindergarten but invading high schools also!

3) The drawbacks and the difficulties since the 90s

a. The retreat of sales Evolution of the French enters of different Disney cartoons at the cinema Year 1937 1946 1950 1961 Cartoons Snow White and the Seven Dwarfs Pinocchio Cinderella One hundred and one Dalmatians Co prod with Pixar Nb enters ? 7 835 702 12 873 512 14 676 411


1992 1994 1995 1996 1997 1998 1999 2000 2001 2001 2002 2003 2003 2004 2006 2007

The Beauty and the beast The Lion King Toy's story The Hunchback of NotreDame Hercules A bug's life Toy's story 2 The Emperor's New Groove Monster Inc. Atlantis, The Lost Empire Lilo & Stitch Finding Nemo Brother Bear The Incredibles Cars Ratatouille X X X X X X X X

4 189 365 10 112 444 2 748 648 6 797 827 4 328 801 3 151 014 4 531 702 1 727 123 3 533 890 4 303 919 1 336 120 9 077 546 3 405 381 5 429 910 1 949 452 7 000 000

Since 1995, Disney made co-production with Pixar. We can see the evolution of the number of the enters at the cinema since 1937. After the cartoon The Lion King, Walt Disney Company had some difficulties to maintain its level, and we have the impression that thanks to the partnership with Pixar, the company manages to maintain its success. Finding Nemo in 2003 marked the great return of the company. The cartoon is the 10th film (among all kind of films) which brought the best benefits all over the world; we talk


about 864.600.000 $. To compare, the 1st is Titanic with 1.845 billions $. b. Disney facing criticism As the success grows, the criticism tags alone and become stronger and stronger attacking the company but also the fundamental of Disneys leitmotiv: a Magic world. For critics, everything is not so white in Disney enchanted environment says Sanjay Newton. A good example is a lesson of masculinity given in the famous beauty and the beast movie when the man bad character is objectifying and subjugating women. This fact was highly exaggerated in another Disney movie like Mulan were it attacks strongly the role women can play but also mens behavior toward them in a very controverted environment: the Chinese population. Some have even pushed the vice to racism were all other communities like Indians, or even French are either savage or/and uneducated people saved by the good charity of the Americans. This is not a personnel engagement but recent survey has proven that some analyst and anthropologist think Disney is not close to the reality of the world but showing a Manichean world to kids were your either good or bad, black or white And this doesnt stop here because some, twisted or not, reported subliminal messages in Disneys cartoons like the Little Mermaid, Aladdin or the Lion King were the creators have had strong imagination and weird (funny?) ideas to make characters say sexual stuff. This may definitely not be real but the fact is that the polemic is doing more harsh than good to a group that has been suffering enough lately. Will the Mouse Company counterattack or rather let words go not to reinforce the polemic? Whatever they do, this global advertisement is certainly what they were hoping for.

III Will Mickey survive to Globalization ?


1) The new strategy of the company

The future strategy of the company to face and adapt to Globalization according to President and CEO Robert A. Iger is a Brand Depth, Not Breadth, is key to Effective Globalization (Burbank, Calif., sept11 PRNewswire). Indeed, the CEOs views on Globalization and technology and their effect on industry will determine the new strategy for the company, according the article. First, we will emphasize the importance for him of building brand identity for the American entertainment industry, especially when a company has to face Globalization. The goal for such brand campaign is to enter the hearts and minds of people all over the world, suggesting a kind of beautiful dream near from the ancestral myth that is able to provoke a catharsis (purgation of unconscious emotions and tensions). The Walt Disney experience is near from going through an earthly paradise in our day-to-day, a fictive one during a Walt Disney picture or quite real for any child who enters a theme park like Walt Disney World with all the figures he has virtually seen, or even identified himself on the screen... According to Robert A. Iger to reach this goal, it is important to identify local tastes and market trends for global industry, especially in the growing markets of China, Russia and India, which cultures are so different! Today in each newspapers, and whatever the country, we can read articles about religious or ethnic conflict (Sudan, Israel...), other ones dealing with political rivalries between countries with different regimes or economic systems. So in a Global world, the one described by Alan Greenspan as the antithesis of terrorism (...) which spreads values of freedom and civil contact, it appears obvious that being apolitical and at the same time attuned to local markets has been really advantageous to the Walt Disney Company, whose most recent film, Ratatouille, was produced in 45 languages. In brief, the creative products of Walt Disney aim to transcend geography. So in order to face the path to 2040 (Goldman Sachs) and the emergence of the BRICs, the company decided to react quickly socioeconomic conditions, politics, border and


concerning the Chinese market because until today it has only partnership with TV programmes whereas other companies like News Corp., Time Warner, Viacom or Sony are already much more implanted over there. Therefore, the company chose Hong Kong, the previous British colony, to penetrate the Chinese market. Moreover, Hong Kong is a touristy and economic centre, and it appears to be the strategic site in Asia for the settlement of the fifth Disneyland. In 2012, another one should open in Shanga. Another aspect of the strategy consists in extending the Disney experience into almost every aspect of the consumers life. Indeed, the magic need will still be there, so the company has to whip it up and to create a utility through a different panel of products reflecting the brand identity. Concerning the strategy lead in France, 2007 was a special year. The park DisneyLand Paris feast its 15th bithday. For the event, a new show has been set up with High School Musical, a TV programme broadcasted all over the world produced by Disney. This new musical show replaced Starring Cruella De Vil. A TV campaign was broadcasted on TF1 and M6 to celebrate all the new attractions available. This birthday is a way to allow to Disney to increase its sales in the park, and create a kind of event which is major in Europe. The second event was a new channel called Disney Magic launched at the beginning of september. It is broadcasted thanks to Numericale and Canal Satellite. The children can only watch on this channel all the cartoons created by Disney. It is only dedicated to cartoons and favours the first job of the company. The main change for the next year concerns Walt Disney Studio. The company is going to reduce 20% of the employees belonging to the Studio and reduce 1/3 of its annual production. Thus, the production will be reduced by 18 to 12 annual films. The first objective is to find the lost profitability again. So, Disney is going to invest more on big productions like The world of Narnia or Caribbean Pirates because they generate more profits. The directors would like also to produce films for a public which is different from children. For example, Caribbean Pirates was


produced by Touchstone, which belongs to the company. From now, the studio will use Disney for every kind of films to win credibility. The public changed, and teenagers like more and more sagas destinated to themselves. Finally, they are thinking about a new organisation of the studios creating 2 different branches: Buena Vista Worldwide and Marketing the other & Distribution Vista dedicated Worldwide to the ditribution Buena Home

Entertainment dedicated to the sales od DVD.

For the next three years the Disney production will innovate but also re-edit famous success to benefit from a public already conquered, like Toy Story III , Musicana or The Little Mermaid III. Its agenda is as following:
2008: The Little Mermaid III, only a video distribution.

Tinker Bell and the Ring of Belief, only video distribution. Bolt, release on 11/28/2008
2009: Rapunzel Unbraided, release on 06/19/2009 2010:

Toy Story III, release on summer 2010- co-produxion

PIXAR. Peter Pan III: back to Neverland Musicana (suite of Fantasia)

2) The assets for the future

For Disney, creativity is the constant that drives everything the company do. In a way, it is its major asset because it creates characters and introduces imaginative worlds that consumers want to visit repeatedly. However, it would be interesting to discover its assets for the future. Indeed, it seems that Globalization remains ever-present on the choices of the company.

Adaptation to a changing demand: Today what is changing rapidly is how customers get a hold of the content produced. They have much more choice over when,


where and how they enjoy it, and how much they pay for it. However, this provides an opening for Walt Disney that understands and acts on these changes.

A pioneer in the front of high quality, easy-to-use ways of media for the consumer: Another asset for the company is the technology that allows them to display and deliver its creative contents in all sorts of new exciting ways. They study the consumer behaviour and his reaction in various distribution platforms. They were the first in October 2006 to make popular TV shows available on iTunes, with 1.3 millions movies downloaded since that time (Caribbean Pirates II, Cars), and 20 millions of TV programmes like Desperate Housewives and Lost. Thus, Disney became the first studio to put movies up for sale digitally when at the same time it sells it as DVDs. For the CEO they considerably increase their market shares without changing of distribution platform. Keeping on accordance with consumers needs is a day-to-day challenge. The company has to be smart and nimble enough to recognize and take advantage of both emerging distribution and changing behaviour. A combination of high-quality content and strong brands: This combination creates infinite opportunity for Disney, whether it is on new technology platforms or in new geographic territories. Whats more, consumers choices continue to increase, they want brands they know and which are qualitative. The Disney name covers both criteria. They make their productions available on new and traditional worldwide distribution platforms.



Despite its international strategy over the last decade, the difficulty for a company like Disney is to maintain a strong understanding of market conditions and variations, which become much more complicated because of the Globalization. There is still an inherent risk for this firm to explore things like new creative ideas, new technologies and new, unknown global markets, even if risk is the path to growth, according to R. Iger! In a way, it justifies the choice for the company to keep distributing beyond traditional distribution like to offer TV programmes like Lost or Desperate Housewives; and at the same time other ones like Cars will be available for download to the consumers local video store. Indeed, the company wants to equilibrate the balance between investments to face globalization, and it would still make benefit at the same time... Globalization gives the consumer the

ability to access to content at the right time and the right price for the CEO, and Disneys challenge is to be listening to those quick evolutions. Furthermore, thanks to this analyze of Disney and the risks and opportunities through Globalization, we wonder if global brands in general are nor playing a new role in our todays world? For instance, in his book Le Malaise dans la Culture Freud analyses that to build their identity human beings need frontiers, and marks. In a way, the rise of communitarism seems to be a consequence of that intrinsic social behaviour. Indeed the frontiers of the nation collapse, so other ones reappear; the state and the nation are caught between market forces and IFIs guidance, and even if other barriers reappear, mass consumption tends to extinguish differences of tastes between cultures ... So if we infer the global strategy of most brands (Walt Disney, Apple...), are not they creating news groups, new ways of thinking, or ways of life to substitute the historical frontiers which are collapsing through the process of Globalization?

Animation can explain whatever the mind of man can conceive. This facility makes it the most versatile and explicit means of communication yet devised for quick mass appreciation" Walt Disney, Founder of Walt Disney Corporation

36 CNN The Walt Disney Company: 2006 Annual Report (PDF file) Walt Disney joue la gratuit sur internet Beijing Information La chine a-t-elle besoin dun autre Disneyland Disney Hong-Kong SWOT ChinaNewsMedia : Observatoire franais des mdias chinois Lvnement : stratgies n1078 du 20/11/1998 PotblogsIE : Disney face aux activistes du Web : Disney vrifiera ses jouets fabriqus en sous traitance (racewire) (Warner Village parks deliver strong results ahead of new attractions)